In letter, Bill Clinton defends family foundation

Bill Clinton offered a strong defense of his family foundation and insisted reports of mismanagement and deficits were taken out of context, in an unusual letter posted on the group’s website.

The Friday post also addressed, for the first time, the audit that the foundation conducted in 2011, which led to a series of recommendations to bring change to a loosely-run, personality-driven organization after its first decade into a more sustainable structure. And the foundation released the summary of that audit.

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The letter, lengthy and posted with little fanfare, goes on for several paragraphs about the Clinton Foundation’s goals and work.

But it also offered a rebuttal to the New York Times’ sprawling look at the internal dysfunction and intra-staff fighting that was taking place up until 2011.

“The New York Times recently reported that the Foundation ran a deficit of $40 million in 2007 and 2008 and $8 million in 2012,” he wrote, saying that it is not an accurate look because it reflected a donation made in increments over several years.

Reports of deficits at non-profits are always alarming to donors, and come as the Clintons are trying to raise an endowment totaling hundreds of millions of dollars - and, potentially, launch another presidential campaign.

“The reporting requirements on our tax forms, called 990s, can be misleading as to what is actually going on. Here’s why. When someone makes a multi-year commitment to the Foundation, we have to report it all in the year it was made. In 2005 and 2006 as a result of multi-year commitments, the Foundation reported a surplus of $102,800,000 though we collected nowhere near that.”

He added, “In later years, as the money came in to cover our budgets, we were required to report the spending but not the cash inflow. Also, if someone makes a commitment that he or she later has to withdraw we are required to report that as a loss, though we never had the money in the first place and didn’t need it to meet our budget. In other words, for any foundation with a substantial number of multi-year commitments, the 990s will often indicate that we have more or less money than is actually in our accounts.”

He also faulted the financial crash of 2008 for his foundation’s fundraising woes, and insisted cash reserves were shifted to cover HIV/AIDs and health training programs.

“For 2012, the reported deficit of $8 million is incorrect, and was based on unaudited numbers included in our 2012 annual report,” he said. “When the audited financials are released, they will show a surplus.”

As for the internal audit of the foundation itself, Clinton said, “Essentially, the review said we needed stronger management staff full-time in New York, where most of our U.S.-based staff are located, and a larger, more independent board. We currently have 2,100 staff and volunteers in a total of 36 countries.”

He added, “The review told us that my passion to keep overhead costs down – at about a low 8 percent for most of the last decade, rising only to above 11 percent in 2012 as we invested to support our growth – had gone on too long and that the Foundation needed better coordination without dampening the entrepreneurial spirit that infuses all our initiatives. In essence, CHAI, CGI, the Alliance for a Healthier Generation, our Haiti project, and other projects were still running too much like stand-alone startups. They were very effective but not sustainable over the long run.”

He talked about changes in structure, including moving former CEO Bruce Lindsey into the chairman’s role and the hiring of Chelsea Clinton associate Eric Braverman and a planned move to Midtown for all the foundation’s facilities.

In so many ways, CHAI’s growth and development have been amazing. It could

Like the rest of the Foundation, CHAI’s significant growth required changes in its management and financial structure. Because of its size and range of activities, creating a separate governance structure made sense. CHAI has brought on a new President and CFO as well as improved its reporting procedures to ensure its growth – both programmatically and organizationally – are keeping pace with its needs.

He also mentioned Ira Magaziner, who remains the head of CHAI. Magaziner has been a sometimes controversial figure who was opposed by Clinton’s former counselor, Doug Band, on a number of initiatives. Band, who informally began his company Teneo at the end of 2007 while Hillary Clinton was running for president and who incorporated it in 2009, was not mentioned in the Clinton letter.

Multiple sources have pointed to the Teneo overlap with clients as a source of concern when it comes to issues raised in the audit, such as the conflicts-of-interest policy at the foundation, although no specific names are mentioned in the summary and it’s unclear if they are in the audit. Officials have repeatedly declined to say who, if anyone, is mentioned in the larger review.